Managing Corporations in Networks - Dirk Baecker - 2001
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Wirtschaft · Soziologie · Philosophie · Systeme · Management
Managing Corporations in Networks
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Thesis Eleven no. 66, August 2001, pp. 80-98
The background of the article is Marxism’s lack of a notion of management. The article suggests that anyone rethinking capitalism should pause for a moment to check on the evidence of such a notion. It seems necessary because today’s theory of capitalism can no longer be content with a structural theory of the conflict between capital and labour, but must integrate a poststructural, or operational, theory of how capitalism is sustained on a day-today basis by organized projects in networks. The article develops a notion of “management by strata”, which is matched to the traditional role of hierarchies, and a notion of “management by ties“, which is tuned to the newly discovered role of hierarchies in networks. The method used in the article is a theoretical study based on the sociological theories of social systems and networks.
It has often been noted that no Marxist theory of capitalism has developed an in-depth understanding of management. It did not have to because the distinction and conflict between capital and labour left little discretion for management. The laws of capital exploitation („Ka-pitalverwertung“) and the historic role of the proletariat already determined the only two types of change considered by Marxism, i.e. concentration and revolution. The forces of competition considered by Marxism turned management into a mere function of translating external demands into internal action, with no room for a strategy of distinction. Marxism had no theory of organisation, except the nineteenth century notion of an „organism“ granted some life of its own yet neatly coupled to external („natural“) selection. And it had no theory of markets other than being the places where the destructive forces of capitalism were unleashed.
For all its envisioning of historical process, Marxism nevertheless is a structural theory of political and economic relationships. The accumulation of capital, the transformation of living work into dead work, the tendency of profit rates to decrease and the ever-recurring necessity of revolution already describe all possible change inherent in capitalism. Managers are either the foremen coercing workers into disciplined work or capitalists looking for further possibilities to increase the value added to be squeezed from them. There is no possible objection to a theory of this kind. If one chooses the perspective of looking at things in the long term, it is still capital exploiting labour. And this is all there is to capitalism. Everything else, for instance, market behaviour, technological evolution, and changes in political regulation, cultural production and intellectual understanding, are just the fluctuations that fuel the process.
Much of sociology is still Marxist to the extent that it believes in the distinction of capital and labour structuring everything else. It simply turned the idea of a rigid coupling between „foundation“ and „superstructure“ into observations of its loose coupling, leaving room for intervening factors like education, family, science and religion, and thus for surprise, ignorance and unforeseen evolution. Even the poststructural inclination to believe that the highly dynamic stability underlying capitalism puts its own complexity constantly at risk and always needs consented action with no guarantee that the whole „project“ will not turn sour one day, does not fundamentally change the Marxist perspective.
Yet poststructuralism (e.g., Luhmann 1995,1998; White 1992) leads to an intensified interest in the „mechanisms“ that relate the fluctuations of the capitalist superstructure back to the foundations that spell out the laws of social reproduction. One of these mechanisms is management. There is room for discretion when one considers that even “natural selection” has to presume some variation upon which it can work. There is even more room for discretion when the evolutionary perspective is applied not only to the structure of capitalism but also to the organisation of capitalist firms. Management then may be considered as a kind of „natural selection“, working upon the variations brought forward by the organisation arguing about changes both in the organisation itself and in its environment. And finally, management even has its retentive or stabilizing function when rearranging selected variations with the already existing structures of the organisation.
Rethinking capitalism will thus have to take management into account. The „new spirit of capitalism“ (Boltanski and Chiapello 1999) is eager to value management in its function of getting projects up and running. And new theories developed since the days of Karl Marx (1993) seem to be able to look at management as a rather complex way of computing the realities of organisation, economy and society. These theories are variously linked to systems, networks and evolution perspectives. While this is not the place to elaborate on them, we will use them in what follows as a guide to spell out questions with regard to the function of management in both maintaining capitalism and perhaps changing the structure of its dynamics.
When looking at the fate of management since the days of the managerial revolution (Chandler 1977), we may observe a change that has turned management from a function on the hierarchy of an organisation into one on its relation between the inside and the outside of the organisation. The management of corporations gives way to the management of corpora-tions-in-networks.
Corporations are hierarchies that control the way work is done by integrating the organisation into different hierarchical levels. Each level assumes a certain autonomy by intense horizontal communication, yet all are dependent on a conditioning of the work done, either by „information“, as it is called, from a lower level or „instruction“ from a higher one. Unfortunately, this linguistic usage implies that the bottom level is eventually the only one in control of all relevant information, whereas the top level is the only one able to issue the instructions upon which everybody else depends. That alone should make evident that the bottom level cannot help calling out for „revolution“, whereas the top level, to both its dismay and delight, is forced to admit the „irrationality“ (Gutenberg 1951) of its work. Both revolution and irrationality had to make up for the logical impossibility of the hierarchy to include the top and the bottom levels into its own order, which consists in always having somebody both above and beneath oneself. As long as nobody looked at the rationale of this logical impossibility, all kinds of ideologies had to step in, calling the proletariat to order (a new one or the old one) and the capitalists to account (in terms of their family, their nation, or their class). The solution to the problems of the top and the bottom resides in the acknowledgment of the closed-loop structure of a hierarchy where everybody depends on everybody else. A closed-loop structure like this calls out for the interruption of the ensuing interdependence and elimination of the symmetry by clearly distinguishing between „information“ and „instruction“.
Talcott Parsons (1960) thus considered the hierarchy of an organisation as a way of setting different levels apart to assure their relative autonomy (possibly by having to „fight“ the hierarchy) and to enable the different levels to condition by each other. That structure seems to have triggered the „managerial revolution“ since at each interface between two different levels a manager has to be installed who both secures the break and links the levels. This is the more ingenious the more that manager realises that his or her very existence depends on the continuation of the problem he or she is supposed to handle. The less „natural“ these breaks appear and the more „artificially“ they have to be introduced and maintained, the more unavoidable the „managerial revolution“ turned out to be and the more „parasitic“ (Serres 1982) the symbiosis of management and capitalism became. Armies, churches and governments somehow succeeded in managing themselves without producing a individually distinctive visibility of management, even if structurally it must have existed. Only industrial organisation produced a distinctive management.
The reason for this is that the artificiality of the break and the ensuing reintegration was simultaneously used to link the organisation not to some kind of „natural“ order (say, of war, belief or governance) but to an equally „artificial“ order of the economy. A manager is somebody who separates and re-links people by gearing their coordination to ideas of economically effective work. That is, management works by two distinctions, an organisational one and an economic one, re-integrating these two distinctions by assuming a „technical“ efficiency to be possible, which becomes the law of economic organisation. All work getting a „purpose“ management uses the distinction between purpose and means to work all organisation, economy and technology by blocking action that serves no purpose, forcing action that proves profitable and explaining all this by showing how it works in enabling and securing production.
I do not mean to imply that management invented organisation, economy and technology. Rather, it was itself invented by linking these three in novel ways, and in ways, as it were, that proved able to keep at bay religious, moral and political ways to consider work. The separation and coordination of people, the economising on work, and the invention of technologies all existed before. New and to be attributed to management is their combination into a mechanism for steering the organisation by means of continual reorganisation.
A corporation, then, is a social invention that relates the need to introduce the division of labour and division of status back to the purpose of maintaining the unity of the ensuing body of work. The assumed unity is a management device. It is the lever that works the interstices of the organisation and turns them into both internal and external interfaces.
All terms used, „management“, „corporation“, „organisation“, „work“, „economy“ and „technology“, are traditional terms for the understanding, description and observation of phenomena that are of a complex and nonlinear nature. The physics of masses, forces and movements still paradigmatic in the nineteenth century is not able to deal with them. We need some kind of a combination of quantum physics and mathematics of dynamic systems in order to get an idea of phenomena which can only be determined by looking at the observer looking at them. The most peculiar feature of these phenomena is their ability to maintain certain states of order by changing their states, losing them and inventing new ones in a highly distributive and always observer-dependent manner. An organisation as well as the economy at large forego any organizing centre and instead literally consist in their ability to let their focus of attention shift, or even oscillate, between inner and outer phenomena, or between self-reference and reference to everything else.
Capital is a case in point. Capital is what gives „capitalism“ its frame of reference. It is a combination of „factors of production“ like work, land, organisation, information, knowledge and capital itself (which thus reappears in itself as a part of itself) which only works by being more or less instantly separable in order to be re-combined in different constellations. Yet such a separation and re-combination looks inside - out and outside - in at the same time, as any notion of „strategy“ tries to suggest, since it is with reference to opportunities that resources are allocated and with reference to resources that opportunities are sought. Capital is the law of capitalism since it (a) distinguishes a certain calculus from different options (e.g., reciprocity, solidarity, civility) and (b) qualifies this calculus in terms of organisation, economy and technology different from, but embedded in, their moral, religious, political, educational and cultural contexts. The perspective of capital immediately suggests resources and opportunities. Thus, the question of entrepreneurial action comes down to the question: Can resources and opportunities be realised while maintaining, amidst all kinds of moralising social protest, the perspective?
Management may be defined as the „re-entry“ (Spencer-Brown 1972) of capital into organisation. It is a re-entry because an organisation when it when it reaches its earliest stage in life begins to assume states of social balances between interests, competences and anticipations that are likely to get out of step with the economic purpose of the organisation. The job of management consists is to bring that purpose back into the organisation while at the same time adapting to its social balances in order to gain a hearing at all. Moreover, management not only handles the organisation but also takes part in it, having its own re-balancing of interests, competences and anticipations. A manager may define everything an organisation is able to deliver as a capability that turns out to be capital when looked at from outside, i.e. from an economic perspective.
That is why sociological systems theory’s proposition to distinguish between the social system of an organisation, even an economic one, and the social system of the economy at large seems to make sense (Luhmann 1988, 2000; Baecker 1988,1993,1999). If one does not take account of that distinction, there is no understanding of „capital“ and „management“ being a working upon it. Organisational decisions are contingent on monetary payments without the former necessarily ending up in the latter. Management is actually trying to ensure decisions that are backed by capital for a certain period of trial and error and eventually sanctioned either positively or negatively.
Organisation is so far the only known way to organise decisions by assuring their capacity to absorb uncertainty (now a „classical“ theorem almost hidden in March and Simon 1993). Decisions emerge only when any decision to be taken can be linked to previous decisions and can lead to further decisions. Uncertainty is absorbed by any of these decisions handling a certain problem, drawing an inference and communicating the inference without communicating the uncertainties relating to the evidence upon which the inference is based. All of these decisions absorb their specific share of the uncertainties facing the organisation (relating, e.g., to technology, markets, capital or motivation) such that in some cases the emergent overall level of the organisation no longer features uncertainty. There may be just some final uncertainty absorption necessary, which for instance consists in taking „strategic“ decisions, such that the scope of possible options is known for all other decisions.
A different way to say this consists in Claude Shannon’s (1963) idea of defining the „sig-nification“ of a message as its selection from a set of possible messages. Decisions have to both select a certain message and define or confirm the set of possible messages either known to the organisation or conceivable for it. That is why Herbert A. Simon (1945) insisted that transmission of decisional premises was the most important, i.e. constitutive, element of any organisation. Organisation means selecting possibilities and assuring the selection of these possibilities by reducing the concomitant ambiguities. Shannon’s notion of communication makes evident that ambiguity is not reduced by defining it away, by simply ignoring it, or by affirming certain mythologies or ideologies, but by reintroducing it into the organisation as the „other side“ of a decision. Ambiguity is the very milieu in which organisation is enacted (Weick 1979).
Management consists in looking at both sides of the process of uncertainty absorption upon which organisation is bases. It looks at the absorption of the uncertainty and at the uncertainty being absorbed. Thus, its own role in managing the organisation consists in absorbing the uncertainty relating to which uncertainties are to be absorbed, and how. One of the best ways to do this is to re-introduce the uncertainties already absorbed into the organisation, albeit in a form both tamed and dramatized, and to thereby control the way they are absorbed (Crozier and Friedberg 1980; Baecker 1993). Management shocks the organisation by presenting to it the possibility of failing to reproduce itself and thereby reinforces its potential for reproduction. This can be done either to affirm the organisation in its actual form. Or it can be done to inititiate variations relating to products, procedures and technology. „Change management“ (Peters 1978; Weick 1982) thus has to challenge the uncertainty absorption to which the organisation is accustomed. It re-introduces the uncertainty, holds back the usual way to absorb it, makes the premises everybody relies upon explicit (and thus problematic with respect to any critical consideration), and introduces new ones that are distinctly self-evident (and thus impervious to further questioning).
The two sides of uncertainty absorption, i.e., the uncertainties to be considered and the mechanisms of absorption, work traditionally by introducing division of labour, hierarchy and contracts:
– Division of labour separates people, thereby visibly making them independent from and dependent on one other, leaving ample room for management to work on both independence and dependence. – Hierarchy, as we said, distinguishes between different layers of the organisation, thus ensuring that uncertainty absorption by any layer in favour of all others, both bottom-up and top-down, is both possible and only exceptionally challenged. „Auth-ority“ is used to block the questioning of decisions taken both on upper and on lower levels, thus transforming the distinctions between the layers into „interfaces“ (White 1982; Eccles and White 1986). Interfaces work as mirrors, giving each layer an opportunity to develop an image of itself and an image of the other layers in terms of its self-image. The top level and the bottom level deliver the most reliable stories because they are the same for everybody else. (This may explain why middle management gets all the attention whenever the organisation looks for a scapegoat able to explain why the organisation is different for everybody.)
– Contracts, finally, introduce some element of law into the organisation, thus providing it with a „lender of last resort“ in case of anybody defaulting. Yet the more important aspect of them is that they draw upon promissory elements (of work to be done and career opportunities to be offered) to call upon the future of the organisation depending on its present. A distinction is made between future and present which acts both as a mechanism of time-binding and as a door opener for the management to spell out its conditions. Here as well, uncertainty is represented and absorbed in a more or less subtle process, which can be calibrated in very different ways depending on conditions on the labour market, cultures of motivation, or balances of communication between work and capital. Division of labour works the „material“ dimension of the organisation, hierarchy its „social dimension, and contracts its „temporal“ dimension. Together, they constitute the social construction of the organisation in terms of the meaning used by, and provided for, it (Luhmann 1995, chap. 2; Weick 1995). Management is an editing of this meaning, which necessarily has to take into account that a specific meaning is attributed by the organisation to its management as well. Any idea of business management being able to manage an organisation from the outside must be considered misleading because management of course is part of the organisation. Yet it can manage an organisation as though from the outside, that being the function which business school is able to support by its ideas of „rational“, „efficient“ and „effective“ organisation.
Management looks at the organisation as if from the outside. Yet it does this from inside the organisation, whether it actually just observes it and analyses its actual state or works upon it, trying to either secure or change its state. Yet a management observing the organisation and working upon it is also observed and worked upon by the organisation as well. A management that duly takes second-order observation into account, is turning the organisation into a complex, nonlinear and non-trivial system (von Foerster 1984). Complexity means loss of control by causality. Non-linearity means the probability of surprise. Non-triviality means unforeseeability because everything being done inside the organisation changes the state upon which it relies to be able to act at all.
Management of a traditional organisation may be considered management by strata, because it is only by hierarchical differentiation that both the blocking of action and the getting of action assume the necessary social evidence. Strata distinguish parts as parts of some same entity, such that difference and identity may be called upon depending upon circumstances: top management possibly emphasises the identity of the overall organisation, middle management the difference of the workable parts, and the workers the ensuing contradictions. Management by strata is socially evident because because a mechanism is in place that may be called „reaching through“ (White 1992). Upper-level people recruit lower-level people (and vice versa) by colluding with them against their respective peers. Making sense by reconciling differences both motivates people eager either to be promoted or to secure their positions, and it blocks questions since the difference, though reconciled, nevertheless continues to be a difference.
Management by strata certainly remains the pervasive way management has been done hitherto. Yet a different concept of management appears to be emerging and has received a lot of attention recently; it may be called „management by ties“. Significantly enough, it coincides with some oscillation of managers between loosening and re-tightening their (neck-) ties, having to change more quickly and more ambivalently between „back stage“ and „front“ (to use the terms of Goffman 1959) than they used to. Yet the ties I am speaking of relate to the „networks“ management recently woke up to when it discovered that both in terms of technology and markets, or process and clients, the organisation to be linked back to its environment already is linked back to it. The old idea was that any organisation organises its action by differentiating itself into three levels (Thompson 1967, expanding on Parsons 1960): The bottom „technical core“ works by being cut off from any environmental feedback. An open top „institutional level“ searches for socially accepted and valued possible aims. The middle „managerial level“ coordinates institutional purpose with technical procedure. This idea slowly gives way to a different image: The technical core links back to both suppliers and clients. The institutional level takes charge of a „corporate culture“ (Schein 1985) providing the necessary „identity“ to operations crossing the „boundaries“ of the firm. And the managerial level desperately searches for a new function.
The organisation becomes networked. It is not only related to a social purpose but is technologically, economically and socially embedded into the environments from which it is distinguished. A new kind of theory of differentiation becomes necessary which is able to show that a distinction is not only working its inside but its outside as well. This is classical sociological thinking because any Durkheimian, Weberian or Simmelian viewpoint insists that a change of one social phenomenon (say, family, religion or enterprise) also changes the society in which it is operates. Paradoxically, for the organisation the new type of insight into its being already networked destabilises rather than stabilises its structure. As long as the organisation is closed toward its environment, there is no difficulty imagining being able to let it work by giving it its purpose as from outside. Firms, schools and hospitals thus know what to do and set out to organise their work as they see fit. As soon as the organisation is considered to be open to the network in which it operates, things become obscure. Shareholders and stakeholders are found to differ. Who is setting the purpose? Firms, schools and hospitals have to begin to search for their purpose instead of being able to take it as given and organise their means accordingly (March 1988). It is no longer purpose but uncertainty that directs organisation (Luhmann 2000).
Networks thus challenge the traditional mechanisms of uncertainty absorption, which in situations of any doubt consisted in calculating means on the basis of purposes taken as given. Networks thus challenge the structure of organisation, as we know it. A type of social system that is as old as hierarchy and which we are just barely beginning to understand will not easily accept a different form of itself, let alone a different type of system. Yet key words such as „motivation“ versus „rationality“ (Peters and Waterman 1982), „symbols“, „culture“ and „narratives“ versus „purpose“, „strategy“ and „structure“(Hassard and Pym 1990; Frost 1985,1991; Cziarnawska-Joerges 1997), or „communication“ versus „bureaucracy“ (Manning 1992) are gaining momentum. Maybe there is a new type of uncertainty absorption emerging that solves the ever-same problem of the transition from one decision to another by different means.
Of course, it is possible that the decision-based approach to organisation may also be challenged, talking not of decisions making up the structure of organisation but of „action“ or „process“ (Mintzberg et al. 1990). Yet it is difficult to dispense with decisions not only in organisational theory. They tend to come back and to inform still those notions that are intended to substitute them (Chia 1994). Perhaps this is because one cannot get rid of the concept of uncertainty absorption when doing organisational analysis, even considering that this concept is rarely taken seriously in organisation research (let alone in a general theory of society where it is still unheard of). Organisation means to reduce uncertainty and to ensure that the very reduction is handed forward to trigger further action by the same organisation, inventing, by that very process, the action and action premises of the past as a guide to motivating, orienting and directing those of the future.
„Decision“ is just the word for that process. It is not an individual or, for that matter, a collective unity making up its mind by looking at a problem, comparing alternatives, giving a different probability and weight to possible outcomes, and then „choosing“ an appropriate one. This is just one way of looking at decisions which have to be taken now, yet which may turn out to be wrong tomorrow. By „rationalising“ the decision in the sense of „rational choice“, members of an organisation can be sure to decide „in the right way“ (according to the standards of „bounded rationality“ in each individual organisation) even if the decisions turn out to be wrong (Harrison and March 1984). The ensuring of the capability to take „wrong“ decisions is a necessary precondition of any organisation, as nobody can be sure to take either right or wrong decisions when all there is known of them is that they are risky.
Thus we talk of „decisions“ because we hold on to „uncertainty absorption“. Yet perhaps there is a new way of uncertainty absorption indicated by the new key words just mentioned. Maybe this new way will turn out to be a very old albeit underestimated one, which has always lurked in the shadows of organisational hierarchy and management by strata. Honouring network theory (White 1992; see also Nohria and Eccles 1992) we may speak, as I said, of network by ties. This does not mean that hierarchy and strata disappear. Yet they assume new functions, having to serve a new kind of uncertainty absorption peculiar to networks.
Besides, it may still be a good idea to talk of „corporations“. „Corporation“, as distinct from „society“, is another word for „uncertainty absorption“ if one considers corporations to intend perpetuity, closure, determinate identity and membership, all guaranteed by inclusive organization, a set of common affairs, procedures and regulative autonomy (Smith 1975). Society, by contrast, then means self-regenerating uncertainty, temporality, difference and precarious inclusion, all of these nevertheless maintained by „autopoietic“ closure towards everything that is not social (e.g., nature, consciousness, artificial intelligence). This implies notions of the social and the society that cannot be spelled out in this article. They rely on an understanding of „communication“ that presumes multiple constitution, coding by distinction, second-order observation, and invisible media made visible by forms (Luhmann 1995, 1997a). Any organisation presupposes that social order already exists, even though the organisation of work may well contradict the overall social order (Udy 1970), and even if society feeds upon organisational features such as decision, hierarchy and authority, quite apart from organisational work, production and consumption.
The notion of „corporation“ refers to the „body“ of an organisation. Such a „body“, I would like to suggest, consists in the „identity“ of the organisation, which in turn and in accordance with our „quantum view“ is defined by the account different observers take thereof. That is why it is necessary to call it „identity“. There are different observers, each taking a different account of the organisation and thus different identities that are to be incorporated into a single identity to be recognized by everybody, albeit in different terms, as it were. That is why we speak of management by ties. There are stories, strategies, cultures, clusters of professions, clans and markets, all of which define their type of tie as a type of social accounting (see White 1992, p. 89). They frame situations. They deliver the keys to possible expectations structuring the behaviour of the participants. They define the pattern of the identical and the different. And not least, they indicate the matrix within which the organisation is embedded, sometimes making a fetish of the organisation blocking its view of anything else, sometimes “ecologising” the organisation towards a greater sensibility of its environments.
Management by ties means paying more attention than ever before to possibilities to incorporate the highly diverse actions and communications of the organisation. There seem to be two prominent ways to do this, indirect control and producer/client communication.
The first one involves a reversal of the traditional picture of hierarchy to a pattern of indirect or even „ecological“ control (Padgett 1981). “Ecological control” means resisting any attempt to control the operations of somebody else directly and instead to control that person’s ability to control him or herself. There is an increasing tendency for all types of organisations to do this (Power 1997), because it demands that any unit of organisation is able to organise itself in terms of both competence and administration. This is the same problem once dealt with by hierarchy, viz. how to autonomise a unit and to remain sure that it still depends on selective conditions to be set by a different unit. “Ecological control” means controlling the ability of a unit to control itself.
Control, to be sure, still means to be able to identify, interpret and turn into action what was aptly called „mismatch signals“ between the intended and the actual (Vickers 1967). This type of signal is all the more necessary the more it becomes apparent that management does not work under the conditions of transparency it sometimes claims to establish, but rather under conditions of intransparency. Niklas Luhmann (1997b) describes how management goes about creating the very intransparency it presupposes to be able to single out the signals considered capable of handling it. It is easy if not unavoidable to create intransparency. It suffices to take into account that any organisation to be managed presupposes eigen-states (or self-reference) in order to be able to (a) manage itself and (b) respond to its management. Yet organisation and management going on change these eigen-states, such that an organisation while organising itself becomes estranged from, and intransparent to, itself. (That is why some people expect a lot from artificial intelligence, which is supposed to be able to know its own source code and thus always act in accordance with itself.)
Indirect control in firms takes the form of a hierarchical instruction to let markets control each unit of the organisation. The hierarchy checks on the profit each unit is producing from its success and failure on its market. Older hierarchies made sure that the subordinates whom each member is supposed to control inversely control that member. A lot of communicational distortion and bias as well as productive tension ensued. Newer hierarchies insist that a client controls each member, because it is the client who gives the most unmistakable signals of success and failure. Of course, for the organisation that is not the end of the story since today’s clients are not necessarily tomorrow’s clients. Each organisational unit may try to invent its clients along with its products and markets and to get support for such an invention by a hierarchy used to the necessity of „investment“ thus discarding the signals to be given by a client. A new language game relating to prospects, expectations, scenarios and possible market shares ensues that defines the terms of competition among the units for the capital supplied by the hierarchy (Eccles and White 1986).
“Ecological control” defines the matrix an organisation is to exploit and rely on. It is an important way to take account of the network upon which an organisation is supposed to work. Yet a second mechanism is necessary that guarantees the stepping back of the older type of hierarchy. All communication in the traditional hierarchy converged in every member of the organisation being able to tell superiors and subordinates apart and to treat them differently. Highly sophisticated techniques of communication have emerged that are still poorly understood and rarely acknowledged for their bureaucratic intelligence. This nevertheless is a structure of communication that seems to have its drawbacks as soon as it comes to a differential treatment of the environment of the organisation. That is why a „critique of bureau-cracy“ accompanies it since the organisation works under the more recent condition of having to define its purpose itself. Bureaucracy, according to Max Weber (1978), was understood to be the exact opposite. It had to deliver the instrument that was able to realise societal needs, be it the education of schoolchildren, the production of goods and services, or the winning of wars. The needs were defined, and argued upon, elsewhere. Yet as soon as the needs became ambivalent, the critique rather than the theory of bureaucracy took over and demonstrated the inability of the bureaucracy to respond to its environment (Merton et al. 1952). Its internal communicational sophistication fell into disrepute since it seemed to amount to its isolation from, and immunisation against, its environment rather than to its astonishing ability to reproduce itself despite all criticism.
Focusing organisational communication on the distinction between superior and subordinate nevertheless today seems outdated. The displacement of that focus appears to be the challenge for any redefinition of organisational culture. Perhaps its isolation and neutralisation is the rationale behind the attempts at „organisational development“ and „organisational learning“ that organisations have experienced these last forty years. These attempts, as Edgar Schein (1997) is ready to acknowledge, result in teaching the organisation that it is indeed communication upon which it relies in constructing its image of its environment and of itself. It is not a „machine“, not an „organism“, not a „brain“, not a „prison“ (Morgan 1986), it is „communication“, albeit of a peculiar (as Argyris, 1957, once said: infantilising) type.
As soon as an organisation, trained by organisational consultants of different therapeutic schools, finds that it is already communicating, it discovers not only the enigma of communication (How does anybody understand anybody else? And if he does, why does he admit to doing so?), but also the possibility of partially re-focusing it. Such re-focusing is certainly not a matter of discretion. Rather, it is a matter of „population ecology“ (Hannan and Freeman 1977) in that different organisations have to undertake different attempts to look at their structure, to change it by trial and error, and to do all this while second-observing what all others are doing. Organisations like anybody else innovate, if at all, in herds.
Yet in accordance with ecological control there seems to emerge an alternative focus of communication, which is the producer/client pair rather than the subordinate/superior pair. The former does not substitute for the latter but rather supplements it. Any communication the organisation undertakes is to be supercoded by the question who is the client of the product to be sold. There are two fractals giving self-similar structure to every unit of an organisation: the hierarchy fractal of superordination and the network fractal of customer orientation.
These two fractals are to be addressed by management by ties. Only ties are able to combine them because the organisation needs a constant switch between matters of hierarchy and matters of market. It has to be able to set itself possible purposes, to go about pursuing these and to remain aware that everything being done is done in internal and external networks that consist of links which not only complement one another but possibly also substitute for one another. Management by ties conveys a knowledge of possible combinations of resources and opportunities together with the knowledge of the contingency (context dependence and circumstantial reason) of these combinations. Ties mean that only „projects“ are to survive the attempts of modern organisation to structure itself and to transmit a feeling of possible order to everybody involved. The incorporation of an organisation working in and by networks involves a management by ties that either sustains a given hierarchy by changing the projects pursued by it or sustains projects by classifying them within a different hierarchy. All stories, strategies, cultures, clans and markets which account for the ties that are embedded in them must offer specifications for both types of change and the reasons for refraining from them temporarily. These specifications define the projects that are undertaken and contain the social calculus that they embody.
Whether management by strata or by ties, it is always a management by distinction. People doing fine could do better. People being prompt could go faster. People who are responsive to others could go on to anticipate the wishes that these others are going to express. A distinction between actual and possible states always underlies a management intervention. All management intelligence consists in trying to figure out which distinctions may move the organisation in a direction that can subsequently be claimed to have been driven by its management.
Such a management by distinction which gives management a certain degree of discretion in choosing the distinctions to be either reinforced or reduced, is appropriate to the calculus of organisation, technology and economy it is to compute. Organisation means being prepared for decisions that can hold the course despite a host of possible deviations. Technology somehow still relates to the „technical core“ that gives security, relief and reason, but as a networked technology it is at the same time subject to all kinds of loose couplings, giving way to surprise and dependence instead of reliable causality (Weick 1990). And the economy is turning itself into a „turbulent field“ (Emery and Trist 1965), where networks oscillate between markets and hierarchies without being able to distinguish between self-triggered effects and ecological dynamics.
Perhaps we need some kind of evolutionary management theory to show its function as the subject and object of such a calculus. This would give us the choice of whether to consider management as a mechanism of variation, selection or retention (Campbell 1969).
As a mechanism of variation it invents distinctions more or less by chance and waits for the organisation to either accept or reject the decisions backed up by them. Perhaps the most important distinction made by management inside an organisation is the distinction between ‘yes’ and ‘no’. Whereas everything else an organisation may do adds up to the organisation saying ‘yes’ to itself (the „eulogical“ function of communication, see Sloterdijk 2000), management is called upon to say ‘no’ to products, procedures, people and the organisation as a whole. Since management is doing this inside the organisation, anticipating, as it were, a possible ‘no’ pronounced by either markets or capital, one may consider this ‘no’ to be a variant of a ‘yes’, as it indeed intends to continue, rather than break off, the organisation. (But tell this to the organisation.) Since a ‘no’ is the most pronounced way to deviate from the communication already going on, to be able to handle the ‘no’ in a distinguished way would in itself be a sign of the organisation’s ability to evolve.
It is equally possible to regard management as a mechanism of selection. It does not have to say ‘no’ to the organisation itself, but can wait for events to happen that indicate possible deviations and then either suppress or enforce the deviation. Both ways, to be sure, change the organisation since it will remember a variation suppressed as well as or even better than a variation enforced which will soon be absorbed and modified by all other structures already up and running. As a mechanism of selection, the job of management does not consist in telling the organisation what is right or wrong. Rather, it consists in providing the organisation with both a challenging and reflective milieu that works like a mirror for all possible decisions and the ways these may be taken, communicated and justified. Management, relying on second-order observation, enables the organisation to self-select its decisions. All members of the organisation observing how the management observes them are able to decide for themselves which decisions seems appropriate depending on the circumstances.
Management may also be considered as a mechanism of retention or restabilisation. Its task then consists in ensuring that variations positively (or even negatively) selected are duly fitted into or onto the already existing structures of the organisation. The more rigid the couplings of an organisation are, the more difficult is this job, forcing the organisation to oscillate between centralisation and decentralisation just to be able to assume stable states, while constantly changing due to new selections of products, procedures or people. The more loosely coupled an organisation is, the easier the job of retention may seem, because here different new structures may be adopted without non-affected parts of the organisation having to adapt to them. Yet loose couplings also have to be accommodated. The job of retention may be even more difficult than with rigid couplings because both dependence and independence between the parts and projects of the organisation have to be taken care of.
Such an evolutionary theory of management does not yet exist. Hitherto, there have only been attempts to develop an evolutionary theory of organisation (Weick 1979; Pelikan 1989; Baum and Singh 1994; Dosi and Marengo 1994; Luhmann 2000). Yet an evolutionary theory of management may be capable of resuming Marx’ theory of capitalism. If management can plausibly play on all three levels of evolution, having at its discretion all three evolutionary mechanisms, then indeed we need much more theoretical work on management than we have been accustomed to.
Thus, an evolutionary perspective may be a good starting point to check on the ambitious self-description of management to be able to „steer“, „govern“ or „lead“ organisation systems. Such an ambitious purpose assumes the ability to play all three evolutionary mechanisms at once and to fine-tune their interdependence and cooperation. Management innovates, judges and re-balances the organisation all in one, by having recourse to a catalogue of measures that are to be deployed in an organised manner to be able to transform the organisation into its own transformation. Even if such a picture of management corresponds to both its self-image and its idealization in the business school version of management, it deviates from a theory of evolution that insists on the separation of the mechanisms. Evolution is made possible by an evolving distinction between the mechanisms of variation, selection and retention. This leads to a situation where evolution is the name of a game whose coherence is guaranteed by chance being able and remaining able to be used by the evolving system (Luhmann 1997, pp. 449/50).
Only a notion of „generic evolution“ that gives more weight to „self-organisation“ than to „natural selection“ (Kauffman 1993) would be in line with management’s ambitious purpose. Yet such a notion would be at odds with management’s (and business schools’) equally im-portant claim that natural, i.e. market or network, selection must prevail over self-organisation lest the latter be doomed to fail. Finally, it is always by bringing the environmental selection back into the organisation that gives management its leverage on the organisation. „Generic evolution“ may be more in line with the „power“ which management sometimes bestows on itself and which a discomforted public is also eager to attribute to it. „Power“ indeed seems to go a long way towards integrating all three evolutionary mechanisms into a single authoritative device. But it is not able to exclude chance, which is the most successful integrative device. This is why all management is said to be and to remain „risky“.
Management is constrained to play one mechanism after the other and to let the organisation – as distinct from its natural, social and mental environment – look after the re-coordination of the three mechanisms by chance, that is by improbable further evolution. This is why I have insisted in this article at some length on the strata and the ties upon which management works. They define the context which cannot be designed by management while working on everything else. Yet management has to gain access to them if it wants to be capable of re-directing production, technology, procedure and coordination.
This sketch of some of the perspectives of an evolutionary theory of management may be an invitation to do more of it. Here I have been faithful to an economic and technological understanding of management. Yet we will have to check how non-profit organisations are about to manage themselves and, we may tentatively add, evolve if they depend on social systems like religion, education, politics or science to be „re-entered“ into the organisation. And we will have to see how theatres, schools and churches that lack a technology with respect to their products and procedures are about to manage, and evolve, themselves. A lot of work has already been done in these fields, either enforcing the „neo-liberal“ belief in man-agement or holding it at bay. Yet as long as we do not have a theory of management in line with sociological knowledge of different social systems and even in line with some theory of society, we will not be able to go beyond the realm of the ideological in this area.
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